- How much money will my family need after my death to meet immediate expenses, like funeral expenses and debts?
- How much money will my family need to maintain their standard of living over the long run?
But how do you know if you need $100,000, $500,000, $1 million or more? The most common way to determine your life insurance needs is by conducting what’s called a Capital Needs Analysis.
Here’s how it works. Start by evaluating your family’s needs. Gather all of your personal financial information and estimate what your each of your family members would need to meet current and future financial obligations. Then tally up all of the resources that your surviving family members could draw upon to support themselves. The difference between their needs and the resources in place to meet those needs is your need for additional life insurance (see diagram below).
This may look simple enough, but calculating one’s life insurance needs can actually get pretty complicated. To make it easy for you to get a general sense of your needs, check out our life insurance needs calculator. It’ll walk you through the process and provide you with an estimate of your insurance needs in a matter of minutes.
But remember, our calculator (or anyone else’s for that matter) is no substitute for the guidance and assistance you’ll get by meeting with a qualified insurance agent or other financial professional. So if you’re serious about protecting your family’s future, contact an insurance professional in your community.